If you’ve started or are thinking of starting up your own business, you may already know that you’ll need to secure funding to get your dream off the ground. No matter the type of enterprise you’re thinking of, whether it’s a marketing agency, IT consultancy or your very own store, funding will take care of the essentials such as wages, rent, and marketing collateral. But when taking out your first-ever business loan, there are a few things to consider, especially as this choice could count towards your future success.
What are your options?
There are a multitude of options available on the market at present. From banks to private and online lenders, it can often be daunting for start-ups to know where to begin. Although banks still account for a large percentage of the lending market, online providers are becoming more popular as they can offer many additional advantages over banks.
Typically their approval rates are higher and applicants can have the money in their accounts in a shorter time frame too. Businesses like Liberis offer products called “Business Cash Advance” which work in a similar way to a loan, however, as they understand the needs of small businesses, payments are made back when your customers pay you!
How to choose the right one
Before you dive straight into applying, it’s important to consider which one is the right one for your venture. You could opt for a secured loan – as the name implies, these types of business loans are secured on assets owned by your business such as property, vehicles, stock, and equipment. An unsecured loan works in the opposite way – these are more aimed at businesses who have been trading for a while who can offer a record of good profits, trading history and usually ask for a personal guarantee.
You may also wish to look at loans for those with bad credit as these are generally available in today’s market too. These will, however, be more expensive, have a higher interest rate and may even have significant restrictions.
Why is it so important?
Taking out your first business loan is a big and important step towards achieving your goals, but taking out the wrong one can have long-term negative effects! It’s imperative you keep up with your repayments as by not doing so, could result in a bad credit score and stop you from being accepted for further lending in the future.
Also, consider how much you actually need to take out. A common mistake of first-time loan applicants is taking out much more than they need or taking it out for the wrong purposes. Cash flow is incredibly important, but ensure you shop around and choose the right first loan for you.